METALS OUTLOOK: Gold, Silver Strength Could Continue, But Watch For Potential Correction
George Gero, vice president and precious metals strategist at RBC, said he was surprised gold and silver did not see profit-taking going into the long weekend. “What that says to me is that the sellers aren’t out there and the buyers are fearful of any negative headlines over the weekend,” he said.
The severe dollar weakness has been partially responsible for the gains in gold and silver as the greenback fell to new lows for the year against several currencies. Gero said the question is whether silver and gold have priced in all the world’s ills, and he believes the answer is no. “This is still a tremendous bull market,” he said, citing continued problems in the Middle East and worries over the eurozone, among other concerns.
“Gold and silver continue to be a political and economic barometer,” he said.
Bullishness in the futures market can be seen in a pick-up in buying of out-of-the-money calls. Gero noted strong interest in the August $50 calls in silver and the December $1,800 gold calls. An out-of-the-money option is an option that is priced higher than current values. It becomes in-the-money if futures prices rise to that area. Buying calls are bullish trades.
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